JUDGEMENT LAW OF LIMITATION ACT 1963 U/s 18
BY
HON'BLE NATIONAL COMPANY LAW TRIBUNAL
PRINCIPAL BENCH NEW DELHI
COMPANY APPEAL (AT) (INSOLVENCY) No. 846 of 2022
(Arising our of order dated 06.06.2022 passed by Adjudicating Authority, National Company Law Tribunal, New Delhi, Bench, Court-II in CP (IB) No. 345/ND/2020)
IN THE MATTER OF :-
M/s G L Shoes (Operational Creditor), Agra U.P - Appellant
Versus
M/s Action Udyog Private Limited (Corporate Debtor), New Delhi - Respondent
Present :-
For Appellant : Mr. Nitin Kaushik, Mr. Mayank Kshirsagar, Ms. Abha Goel, Advocates
For Respondent : Ms. Varsha Banerjee, Mr. Udit Singh, Mr. Kaushik Khaitan, Advocates.
NCLAT Held That :-
Normally Section 18 of Limitation Act, 1963 states that an acknowledgement is clear and should be in writing signed by the party against whom the right is claimed or the party who has acknowledged its Debt should specify it clear in writing under Section 18 of Limitation Act, 1963.
Here under this Landmark Judgement dated May 24, 2023 under Company Appeal (AT) (Insolvency) No. 846 of 2022 NCLAT held that :-
"Irrespective of the Acknowledgement whether it is electronic or in physical form i.e. "sign" or "signed" merely because a document sent via email, the mandatory requirement of section 18 can not be exempted."
It Means
Just like an unsigned document sent via physical post cannot be construed a valid acknowledgement of debt in terms of section 18 of the Limitation Act, 1963, the same way in todays technologically advance word, the necessary the necessary condition of signing/authenticating a document sent/received as an attachment with an e-mail cannot be dispensed with for treating it as valid acknowledgement in terms of Section 18 of the Limitation Act, 1963.
The Present appeal is filed u/s 61 of the IBC Code 2016 by the Appellant arises out of the Order dated 06.06.2022 (Impugned Order) passed by the Adjudicating Authority (NCLT-II-New Delhi) in CP (IB) No. 345 (NB)/ 2020.
By this Impugned Order the Adjudicating Authority has dismissed the Section 9 Application filed by Operational Creditor- M/s G.L. Shoes (the present Appellant) seeking initiation of Corporate insolvency Resolution Process (CIRP) against Corporate Debtor - Action Udyog Private Limited (the present Respondent) . Aggrieved by this Impugned Order, the present appeal has been preferred by the Operational Creditor.
Making his submissions the Ld. Counsel for Appellant submitted that the Operational Creditor (i.e. M/s G.L. Shoes) used to supply footwear and related products to the Corporate Debtor/ Respondent on the basis of purchase Orders received from them. It was also submitted that the invoices stipulated payment to be made 75 days from the date of Invoice. Goods were supplied between April - June 2016 and payment fell due on 08.07.2016.
The date of default on the part of the Corporate Debtor as submitted by the Appellant is 08.07.2016. The Operational Creditor issued Demand Notice to the Corporate Debtor on 02.07.2019 demanding payment of Rs. 22.26 Lakhs as unpaid Operational Debt including interest @18% per annum.
However, the Corporate Debtor did not issue any Notice of dispute. The Operational Creditor thereafter filed Section 9 application before the Adjudicating Authority.
The Ld. Counsel for the Appellant contended that the Section 9 application was erroneously dismissed by the Adjudicating Authority on grounds of having been barred by limitation. It was submitted that the impugned order took note of date of default to be 08.07.2016 as mentioned in Part-IV of the Demand Notice and held that the Section 9 application having been filed on 22.01.2020 which was well after three years from the aforementioned date of default, the same was barred by law of limitation.
It was vehemently contended that the Corporate Debtor had clearly acknowledged the debt in their email dated 05.05.2017 which therefore extended the period of limitation.
The Ld. Counsel for the Appellant stated that the Adjudicating Authority has erred in holding the acknowledgement of Debt by email cannot be accepted on the ground that statement of account contained in an external file attachment to the main body of the email and that it was not duly authenticated by the signature of the authorized person and did not bear the company seal.
Dilating on the issue of limitation, it was submitted that the Hon'ble Karnataka High Court in the matter of Sudarshan Cargo Pvt. Ltd. Vs. M/s Techvac Engineering Pvt. Ltd. 2013 SCC Online Kar 5063 ( 'Sudarshan in Short) has held that an email acknowledging the debt constitutes a valid and legal acknowledgement of the Debt, despite the fact that it is not a strictly "signed" documents for the purposes of Section 18 of Limitation Act, 1908.
The email, being a legally recognized form of communication under the provisions of Information Technology Act, 2000 (IT Act in Short) it is valid Acknowledgement under Limitation Act, 1908.
Refuting the submissions made on behalf of the Appellant, it has been strongly contended by the Learned Counsel for the Respondent that the claim of the operational debt is clearly time-barred. It has been contended that the date of default mentioned by the Appellant in Part IV of the application is 08.07.2016 whereas the Section 9 application was filed before the Adjudicating Authority on 22.01.2020. Hence, the application having been filed after three years from the date of default, it was clearly barred by limitation and hence not maintainable.
As regards, the plea taken by the Appellant that the application was not hit by limitation since there was an email dated 05.05.2017 from the Corporate Debtor acknowledging the debt, it was argued that the said email cannot be relied upon to extend the limitation since it was difficult to ascertain beyond doubt to which date the statement of account attached therein belonged to. Buttressing their argument, it was pointed out that the said email was neither signed by the Corporate Debtor nor sent by any authorized person on behalf of the Corporate Debtor. More importantly, the statement of account attached to the email acknowledging the debt was unsigned and did not carry the stamp and seal of the Corporate Debtor. Hence, in the absence of any date and proper authentication thereof, the authenticity of the external file attachment containing an aged account statement of the Corporate Debtor cannot be ascertained beyond doubt. It was, therefore, argued that the Adjudicating Authority had rightly held that the Company Petition filed before it was barred by limitation.
Contentions of Appellant :-
- It is the case of the Appellant that the email of 05.05.2017 from the office of the Corporate Debtor had acknowledged the operational debt. This email was an official communication since the email address saurabhsingh@actionshoes.com was generally used by the Corporate Debtor for corresponding with the Appellant. The said email acknowledged the liability and this mail having been issued before expiry of the limitation period of three years it had extended the limitation period. The Section 9 application was therefore well within limitation period.
- The Section 18 of the Limitation Act does not provide that the acknowledgment has to be in any particular format and hence the email of 05.05.2017 and the file attachment which had been transmitted electronically must be construed as meeting the requirement of Section 18 of the Limitation Act.
Counter Arguments by Respondent
- The counter argument advanced by the Learned Counsel for the Respondent that the issue in question is not whether the communication sent out electronically is legally valid or not but whether an unsigned document sent electronically is admissible and constitutes a valid acknowledgment for the purpose of extending the period of limitation in terms of Section 18 of the Limitation Act.
- It has also been submitted that the Hon'ble Rajasthan High Court in M/s. Babulal Rukmanand vs. The Official Liquidator, Bharatpur Oil Mills (Pvt.) Ltd. 1967 SCC On Line Raj 20 held that unsigned books of accounts/statement of accounts do not constitute a valid acknowledgment under Section 18 of the Limitation Act, 1963. Therefore, any reliance placed on the said email of 05.05.2017 and statement of accounts attached therewith, is non-est in law since the alleged statement is unsigned and not authenticated by the Authorized Representative of the Corporate Debtor.
Hon'ble NCLAT observed and held as follows :-
- Hon'ble NCLAT noticed that the Corporate Debtor in their reply dated 09.03.2020 to the Section 9 application filed by the Appellant had raised several objections, inter-alia, non-maintainability arising out of the bar created by the Indian Partnership Act, 1932; invalidity of demand notice being in Form III and for not containing date of default; non-receipt of demand notice and non-service with the Information Utility; defective issue of demand notice; etc.
- Hon'ble NCLAT notice that the Adjudicating Authority in the impugned order has dealt with the above contentions raised by the Corporate Debtor in the context of maintainability of Section 9 application and not being convinced had set aside these grounds.
- However, on the issue of limitation, Hon'ble NCLAT held that the Section 9 application has not been filed within three Company Appeal (AT)(Insolvency) No. 846 of 2022 5 years from date of default and in the absence of sufficient material on record to establish extension of limitation period, Section 9 application was dismissed.
- Analyzing the facts of the present case, Hon'ble NCLAT find that the Corporate Debtor had asked the Appellant/Operational Creditor on 23.03.2017 to send their ledger account to one of the officers of the Corporate Debtor as seen at page 228 of Appeal Book. The Appellant responded by sending a reply email on the same date along with an attachment containing statement of accounts as seen at page 230 of Appeal Book. This email was responded to by the Corporate Debtor on 05.05.2017 with the remarks ‘FYI’ as seen at page 231 of Appeal Book. This email has been held by the Appellant as an acknowledgment of debt on the part of the Corporate Debtor.
- That from perusal of the email and attachment annexed therewith dated 05.05.2017, it is observed that the main body of the e-mail does not contain any statement regarding acknowledgement of the debt by the corporate debtor and the attachment relating to Accounts attached therewith is neither signed by any authorized person nor bears the Company Seal. Further, we notice that the Applicant, for the acknowledgement of debt, has referred to and relied on the attachment containing Accounts statement of the Corporate Debtor, which as we have observed, is not duly authenticated.
- Hon'ble NCLAT further stated that if acknowledgement of debt is made basing on the contents of an attachment, which is an external file exported/attached with the mail and if that attachment is not duly authenticated by signature of the authorized person and date or/and Company Seal, it is not possible to ascertain beyond doubt to which date the document is generated or belongs to.
- Just like an unsigned document sent via physical post cannot be construed a valid acknowledgement of debt in terms of section 18 of the Limitation Act, 1963, the same way in todays technologically advance word, the necessary the necessary condition of signing/authenticating a document sent/received as an attachment with an e-mail cannot be dispensed with for treating it as valid acknowledgement in terms of Section 18 of the Limitation Act, 1963. Hence, the attachment containing accounts statement annexed with the e-mail dated 05.05.2017 without any signature and date or/and Company Seal cannot be held authenticated or valid in terms of Section 18 of Limitation Act for extending the period of Limitation.”
Hon'ble NCLAT held that :-
In view of the foregoing discussions, we do not find merit in the submissions raised by the Learned Counsel for the Appellant to warrant any interference in the impugned order. We are of the view that the Adjudicating Authority did not commit any error in rejecting the Section 9 application filed by the Appellant on grounds of having been barred by limitation. There is no merit in the appeal. Appeal is dismissed. No order as to costs.
[Justice Ashok Bhushan] NEW DELHI
Chairperson 24.05.2023
[Barun Mitra]
Member (Technical)
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